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FAQs on transaction reporting – Question II.3.3.2

Reference to:

  • Article 3(1) of the Implementing Acts. List or reportable contracts: Options, futures, swaps and any other derivatives of contracts relating to electricity or natural gas produced, traded or delivered in the Union.
  • Option Details from ANNEX “Details of Reportable Contracts” in the Implementing Acts: Tables 1 and Table 2
  • TRUM, Table 1 #44: Option Exercise Date

“A European style option can only be exercised at the maturity date.”

  • TRUM, Table 1 #46: Option Exercise Date:

“This field identifies the date at which the option holder has the right, but not the obligation, to buy or sell the commodity or underlying instrument at a specified price on or before a specified date. In the case of an American, European or Asia option style, one exercise date is reported. In the case of a Bermudian option style, several dates may be reported.”

The issue:

1)  How should market participants report strip options?

2)  What is the reporting guidance from ACER for fields #44 Option Style and #46 Option Exercise date (Table 1) in regards to strip options? According to TRUM guidance, only Bermudian options can have more than one exercise date. For European option style, only one exercise date is required to be reported based on same text in TRUM.

Example:

Business Case: Market Participant A is trading strip options European style.

According to Market Participant A’s perspective, a strip option of the European style is a series of vanilla European options (a series of European puts or a series of European calls) on a number of consecutive contracts (e.g. January, February and March), each with the same strike price, but with a different expiry date.

Example: A strip option is concluded for delivery in January/February/March (three consecutive months). There are three exercise dates; each exercise date is two days before delivery start (e.g. 29th of December for delivery in January, 30th of January for delivery in February, 27th of February for delivery in March). Market Participant A has the right, but not the obligation, to exercise the option with delivery for January on 29th of December. In line with that, on 30th of January Market Participant A has the right, but not the obligation to exercise the option for delivery for February with the same strike price, and the same for delivery in March.

According to our current interpretation strip options are a kind of concatenated European style options, thus our interpretation is the report in the following manner:

  • Field #44 Option Style: Report as “European option style”
  • Field #46 Option Exercise Date: Report all relevant exercise dates of the strip option in this field, i.e. not just one exercise date as per the existing ACER guidance.

We would be grateful for ACER’s views on this envisioned approach, please.


Answer:

[UPDATED] to clarify Option Style of strip options

[Added] Since the introduction of the validation rule 2AODOEDR2x (in June 2017) – which prevents the reporting of records with a Contract Delivery Start Date prior to Contract Option Exercise Date unless the Option Style is ‘O’ for Other – strip options should be reported with Option Style ‘O’.

We understand that the option described above can be reported as:

  • Field #44 Option Style: “Other” “European option style”
  • Field #46 Option Exercise Date: the field should be repeated three times, where each value corresponds to a different exercise date, relevant to the individual delivery period (see below)
  • Fields #49 and #50 Delivery Start/End Date: these two fields should also be repeated three times, once for each corresponding delivery period (in this case it is one month per each delivery period).

The example below clarifies further the way to report the three fields above.

faqs-on-transaction-reporting-question-ii-3-3-2-table

Last update: 20/07/2018   RSS_Icon Subscribe to this Page’s RSS